The headline in Politico is very sunny: “Ivanka Trump scores win with Senate plan to double child tax credit.” It’s the headline she wanted.
— GOP (@GOP) November 15, 2017
But the reality of the new child tax credit in the Senate bill, championed by Ivanka Trump, is far more complicated. Ivanka Trump’s win, like much of the rest of the tax plan, prioritizes the wealthy over Americans struggling to make ends meet.
The Senate has agreed to increase the child tax credit from $1,000 to $2,000 — a more generous increase than the House bill which increases the child tax credit to $1,600. But real story is who will benefit and for how long.
Like all the individual income tax benefits in the Senate bill, it expires in 2025. Meanwhile, huge cuts to the corporate tax rate are permanent. Effectively, under the Senate bill, virtually all individuals will face a tax increase after 2025 to finance these corporate cuts, including families with children.
The expanded child tax credit is also only partially refundable. That means about 23 million children will be ineligible for all or part of the benefit because their families don’t make enough income to qualify for the credit. Many low-income families do not currently pay income tax (although they pay a high percentage of their earnings in payroll and other taxes) and therefore do not benefit from non-refundable tax credits. The bill only allows the tax credit to be refundable up to 15 percent of income above $2,500, up to a maximum of $1,100 per child. (The $1,100 is an increase from the current limit of $1,000.) So, for example, a single mother with two children and earnings of $10,000 is eligible for a $1,125 child tax credit (just a few dollars more than existing law) rather than a tax credit of $4,000 that would go to a much wealthier family. About 10 million children would receive effectively no benefit at all.
Instead, the child tax credit provision in the Senate bill allows many more wealthy families to benefit. Currently the tax credit begins to phase out for a married couple with a combined income of $110,000. Under the the Senate bill, the phaseout threshold is raised to $500,000. This creates some perverse effects.
Take a married couple with two kids and income of $24,000. Their child tax credit goes up just $100 for inflation per child. A family of four making $500,000 get new full $1,000 for each kid. https://t.co/dV7D1AYQ7b
— Chuck Marr (@ChuckCBPP) November 15, 2017
Ivanka Trump and the Senate Republicans she is working with faced a decision. Should they provide benefits to families making $500,000? Or should they provide benefits to struggling families who need help the most? Ivanka Trump has chosen the former.
In so doing, the choices made on the child tax credit mirror the choices made in the rest of the bill. Given a choice, the needs of the wealthy are prioritized over the needs of the working class. In a few years, it goes away for everyone to finance large, permanent tax cuts for corporations.